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Previous-year questions
Attempt them here.
UPSC Prelims 2026 · GS Paper I
Which one of the following correctly represents the three key sub-indices of the Financial Inclusion Index (FI-Index) of the Reserve Bank of India (RBI) ?
Answer (c) & explanation
The sub-indices are Access, Usage and Quality (c). The RBI launched the FI-Index in August 2021. It covers banking, investments, insurance, postal services and pension, and gives one value between 0 and 100. Its three parameters are Access (35%), Usage (45%) and Quality (20%). Options (a), (b) and (d) list areas or ideas that are not its sub-indices; GDP contribution and affordability are not parameters.
Notice the logic: usage has the most weight, because an account that is never used does not mean real inclusion. Quality includes financial literacy and consumer protection. The index is published every July, and it has risen steadily, helped by Jan Dhan (2014) and UPI.
Which one of the following best describes the key objective of India's 'Open Network for Digital Commerce' (ONDC) initiative ?
Answer (c) & explanation
ONDC aims to break the dominance of large platforms (c). The Open Network for Digital Commerce, a DPIIT initiative (2021-22), is an open set of rules, like UPI for shopping. A buyer on one app can buy from a seller listed on another app. This interoperability lets small sellers reach buyers without joining a giant platform. Option (a) is wrong: it does not give the government control of transactions. Option (b) is wrong: private players can join; they are not replaced. Option (d) is wrong: it does not force UPI payments.
Notice ONDC's design: it is a not-for-profit company and part of India's Digital Public Infrastructure, along with Aadhaar, UPI and DigiLocker. It now covers food, groceries and mobility too.
Trap
options (a), (b) and (d) use strong words: "all", "replace", "mandate". A public digital platform usually opens a market; it does not take it over.
Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct ?
Answer (d) & explanation
Statement (d) is not correct (d). Under UPI, money moves between bank accounts; the deposit is a liability of the bank. The Digital Rupee (e₹) is like a currency note in digital form, a direct liability of the RBI, not of users or banks. Option (a) is correct: UPI is a payment system, while the e-rupee is sovereign currency. Option (b) is correct: an e-rupee transfer moves value from wallet to wallet with no separate settlement. Option (c) is correct: e-rupee wallet transactions do not appear in bank statements.
Notice the legal base: the RBI Act was amended in 2022 to let the RBI issue a CBDC. Pilots began that year in wholesale (e₹-W) and retail (e₹-R) forms.
Trap
a "not correct" question. Look for the statement that puts the RBI's liability on someone else.
Which of the following statements about Real-World Assets (RWA) Tokenization are correct ?
1. Tokenization is the process of turning real world assets into digital tokens using blockchain technology.
2. Tokenization of real world assets offers 24x7 access, promoting financial inclusion.
3. Tokenization of real world assets will allow the access to high growth investment opportunities for individuals in India.
Select the answer using the code given below :
Answer (a) & explanation
All three statements are correct (a). Statement 1 is right: tokenization turns a real asset, like a building, bond or gold, into digital tokens recorded on a blockchain. Statement 2 is right: tokens can be traded 24x7, which widens financial inclusion. Statement 3 is right: small, fractional tokens let ordinary individuals get into high-growth investments that once needed crores. So options (b), (c) and (d) fail.
Notice the risks: unclear regulation, cyber threats and weak investor protection. In India, related steps include Fractional Ownership Platforms and REITs and InvITs, which already let small investors own slices of real estate and infrastructure. The RBI is also testing tokenized deposits and government securities in sandbox pilots.
A bond whose proceeds are used only to finance or refinance a combination of both environmental and social projects is called :
Answer (c) & explanation
This is a sustainability bond (c). Under the ICMA principles followed worldwide, a bond that funds a mix of environmental and social projects is a sustainability bond. Option (a) is wrong: a green bond funds only environmental projects, like solar power. Option (b) is wrong: a social bond funds only social projects, like affordable housing. Option (d) is wrong: a sovereign bond is any bond issued by a national government, whatever its use.
Notice India's practice: India has issued Sovereign Green Bonds since January 2023, with the money going to projects like metro rail and renewable energy. A sustainability-linked bond is different: its money can go anywhere, but its interest rate depends on meeting ESG targets.
Trap
"Green Bond" is the most familiar term. The words "both environmental and social" point to the combined label.
Which of the following statements about M1xchange's role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct ?
1. M1xchange provides collateral based loans to MSMEs.
2. M1xchange facilitates discounting of invoices and Bills of Exchange for MSMEs.
3. M1xchange functions as a credit rating agency for MSMEs.
Select the answer using the code given below :
Answer (b) & explanation
Only statement 2 is correct (b). Statement 2 is right: M1xchange is an RBI-licensed TReDS platform (Trade Receivables Discounting System) where an MSME's invoices and bills of exchange are discounted. Statement 1 is wrong: it does not give collateral-based loans; financing is without collateral, backed by the big buyer's credit. Statement 3 is wrong: it is not a credit rating agency. So options (a), (c) and (d) fail.
Notice how TReDS works: an MSME uploads an invoice raised on a large buyer, and banks bid to discount it, so the MSME gets cash fast. The other platforms are RXIL and Invoicemart. Companies with turnover above ₹250 crore and CPSEs must join TReDS, easing delayed payments to MSMEs.
Which one of the following best describes the 'Crowding Out Effect' in the context of fiscal policy ?
Answer (b) & explanation
Crowding out means government borrowing raises interest rates and cuts private investment (b). When the government borrows heavily, it competes with companies for the same pool of savings. Interest rates rise, and some private projects no longer pay, so private investment is pushed out. Option (a) is wrong: it describes the opposite, "crowding in". Option (c) is wrong: higher taxes usually reduce, not raise, private spending. Option (d) is wrong: government spending does affect aggregate demand.
Notice the policy link: this is why high fiscal deficits worry the RBI and investors. India's FRBM Act (2003) set limits on deficits. The Centre aims to cut its fiscal deficit below 4.5% of GDP and then shift to a debt-to-GDP target.
Which of the following statements about insurance in aviation sector is/are correct ?
1. 'Aviation Hull Insurance' covers the physical aircraft, including the body, engine, and on-board equipment.
2. Under the Montreal Convention, adopted in 1999 by over 130 countries, including India, airlines are strictly liable to pay compensation to the family/nominee of every deceased passenger without requiring the family to prove fault.
Select the answer using the code given below :
Answer (c) & explanation
Both statements are correct (c). Statement 1 is right: hull insurance covers the aircraft itself, its body, engines and on-board equipment. Statement 2 is right: under the Montreal Convention, 1999, which India joined in 2009, the airline is strictly liable for a passenger's death or injury up to a set limit, so the family need not prove fault for that first tier. So options (a), (b) and (d) fail.
Notice the tiers: above that limit, the airline can escape further payment only by proving it was not negligent. The convention replaced the older Warsaw Convention (1929). In India, it is applied through the Carriage by Air Act, 1972. Passenger and third-party claims fall under liability insurance, not hull cover.
The Haryana Electricity Regulatory Commission (HERC) on 19 October 2026 gave Eleven Power Pvt Ltd a 25-year parallel distribution licence for Gurugram and Nuh. It will be Haryana’s first private distributor and India’s second case of parallel licensing after Mumbai. The State government and power-sector staff oppose it and plan to appeal to the Appellate Tribunal for Electricity.
India is set to make 1% blending of Sustainable Aviation Fuel (SAF) compulsory for international flights from 2027, rising to 2% in 2028 and 5% in 2030, industry sources told The Hindu. The trigger is ICAO’s CORSIA, whose mandatory phase begins in January 2027. Indian airlines may need about 5 million tonnes of carbon credits a year, costing $50–75 million, while a full national SAF policy is still awaited.
Opening the 7th Agrivoltaics World Conference at Bharat Mandapam on 21 October 2026, the first in the Global South, Renewable Energy Minister Pralhad Joshi said the next phase of PM-KUSUM will carry one of the world’s most ambitious agrivoltaics programmes. Agriculture Minister Shivraj Singh Chouhan said the policy must work for the 85% of farmers who are small and marginal, with an average holding of just 0.96 hectare.
The Index of Core Industries (ICI), base year 2022-23, grew 7.9% year-on-year in September 2026, up from a revised 5.9% in August, the Commerce Ministry said on 21 October 2026. Iron ore (18.4%), electricity (11.4%) and coal (10.7%) led, while fertilizers, natural gas and crude oil shrank. Growth for April–September 2026 was 5.1%, double the 2.5% of a year earlier.
UPSC angle: Prelims: ICI vs IIP, compiling agencies, base year. · Mains GS-III: industrial growth and energy security.
The Regional Connectivity Scheme UDAN (Ude Desh ka Aam Nagrik) completes ten years on 21 October 2026. A PIB backgrounder says it has operationalised 687 routes and 95 aerodromes and carried 1.72 crore passengers. Its next phase, launched on 4 July 2026, runs from 2026-27 to 2035-36 with Rs 28,840 crore for 100 airports, 200 helipads and airline support.
As the India–New Zealand FTA came into force on 20 October 2026, the two customs services signed a Memorandum of Cooperation on Electronic Origin Data Exchange. Signed on 19 October by CBIC and the New Zealand Customs Service, it lets origin data on goods move electronically in advance, so that exporters can claim the FTA’s duty cuts faster and with fewer disputes.
UPSC angle: Prelims: CBIC, CAROTAR, rules of origin, WTO TFA. · Mains GS-III: FTA utilisation and trade facilitation.